In recent years we’ve seen an explosion in interest from retail investors in alternatives, spanning both liquid exposures (such as gold) and illiquid private market strategies. This is primarily due to the diversification and return seeking benefits these allocations offer. This interest in private markets reflects the increasing sophistication of our client base and desire to buffer volatility through uncorrelated return drivers.
And following an arduous three years of platform negotiations, fund manager due diligence and liquidity analysis, we’re pleased to announce the launch of Zenith’s Private Assets Portfolio (ZPAP). ZPAP has been launched exclusively in partnership with Link Wealth, providing a scalable and accessible implementation pathway for advisers and their clients.
This has been the result of the evolution of our Approved Product List, whereby we’re now at a steady-state of having sufficient high-quality private markets solutions offered under a PDS, with strong governance and robust operational structures with which we can populate a diversified portfolio; all while still retaining a broad line-up of bench strategies too.
Importantly, this has also relied on our stakeholders at the wrap platforms to enhance their technology offerings, such that a monthly liquid SMA can work in tandem with our daily-liquid offerings, which we’ve been managing for more than 10 years.
Zig when the markets zag
The result is a highly curated portfolio, offering distinctly different return drivers that combine the data-driven insights from our internal Research and Asset Allocation teams into a multi-manager, multi-asset solution.
While we remain constructive on the public market outlook and are confident that our daily-liquid solutions will continue to meet their investment objectives, we see a strong use case for allocations outside of public equity and bond markets. These private market allocations will complement a diversified public portfolio to ‘zig when the markets zag’. However, this is with the caveat that the allocation is intended to be a satellite position to complement a daily liquid portfolio.
From a top-down perspective, we’re building in resiliency through the integration of the long-term themes identified in our most recent Strategic Asset Allocation (SAA) review. This spans fiscal activism, AI adoption, rising investment spending (infrastructure, defence and the energy transition), geopolitical risks, inflation volatility and the impact of passive investing. We believe that investors will be rewarded for navigating these cross-currents through both public and private avenues.
What does this mean in practice?
ZPAP has been structured to achieve a targeted return of 10% p.a. to 12% p.a. (net of fees), over an investment horizon of 7 to 10 years. This time horizon reflects its limited liquidity window, with monthly redemptions subject to a quarterly cap. Notably, we prioritise alignment between asset liquidity and fund redemption terms. As such, we favour managers with clear liquidity plans covering two years of redemptions, stress-tested scenarios and equitable treatment of investors. We avoid strategies reliant on inflow assumptions, as we view this as inconsistent with fiduciary portfolio construction.
Source: Zenith Investment Partners
Driving in a different lane
The core engine of the portfolio will comprise Private Equity (PE), Alternative Income, Real Assets and a liquidity sleeve. The private equity component seeks to generate attractive returns through a complementary blend of managers that target different regions and subsectors.
A similarly diversified approach is sought through the Alternative Income sleeve, which captures an attractive spread above traditional fixed income instruments through considered allocations both domestically and offshore to higher yielding products. Finally, the Real Assets sleeve targets both unlisted property and infrastructure to deliver a compelling combination of both capital growth and income, while remaining uncorrelated to traditional markets.
As a deliberately differentiated portfolio, we’re intentionally driving in a different lane to public market strategies and are comfortable with this illiquidity given the diversification benefits.
Like moths drawn to a flame
Whilst the heightened interest in private market strategies is encouraging as the financial advice landscape evolves, we emphasise that a greater level of due diligence is essential when traversing this space. And due to the innovative nature of ZPAP, we’ve developed a CPD accredited training program for advisers to complete prior to being granted access. This program will be available to our adviser clients in Q3 when the ZPAP portfolios become available to our broader client base.
Crucially, ZPAP is designed to serve as a core private markets allocation, providing investors with institutional grade investment quality. The combined input from our Portfolio Solutions, Research and Asset Allocation teams provides a disciplined opportunity set, risk-controlled exposures and complementary strategy sleeves.
Against this backdrop, we’ll always be patient, ensure the portfolio is prudently balanced, and laser-focused on any emergent liquidity stresses. The result is a compelling risk-return profile built from a research house with a multi-decade pedigree in investment research and portfolio construction.
In a segment of the market where complexity and headline returns can obscure risk, disciplined portfolio construction and governance remain paramount, reinforcing that not all that glitters is gold.
